Lithium-ion batteries are in short supply among Indian electric car manufacturers
This isn’t turning out to be a particularly thrilling Diwali for Indian automakers. To begin with, a persistent chip scarcity has led fuel-based automakers to skip shifts in manufacturing. Even electric vehicle (EV) makers are now having difficulty obtaining lithium-ion batteries, whose costs are rising at a faster rate than Mumbai’s record-setting equities indices.
Surging worldwide demand — and a decisive change in favour of electric vehicles in Western Europe and the United States — are at the root of the supply shortage. Furthermore, factors like production halts in China owing to a coal-fired power deficit and shipping route congestion have hampered supply to India from its northern neighbour.
Apart from South Korea and Taiwan, China is India’s main supplier of lithium-ion batteries.
Furthermore, cell producers prefer to deliver to markets with bigger quantities, such as the wealthier areas of Europe and the United States.
To be fair, EV sales in India are still insignificant when compared to more developed markets like China, the United States, and a few European nations.
Due to a lack of containers, delays of 10-15 days in shipments from China have become the norm, according to Samrath Kochar, chief executive officer of Trontek Electronics. His firm imports cells and assembles them into battery packs for a variety of electric vehicle manufacturers. “Our procurement fell by 50% in September, and as a result, our supply fell by 50%,” Kochar told ET.
Shipments expected in September came this month, offering some respite, but Kochar said the next cargo was still unknown.
For large orders, a consortium is required.
Costs have also risen dramatically due to supply restrictions. According to research by Benchmark Mineral Intelligence, prices of battery-grade lithium carbonate have risen to an all-time high after surging 27 per cent in only two weeks to September 30.
Shipping expenses have also risen dramatically. According to some calculations, shipping costs from China have increased fourfold since this time last year. In certain circumstances, companies have resorted to flying in cells by air freight to avoid shortages.
All of this has resulted in increased expenses for EV manufacturers. Trontek, for example, has recommended a 5% price hike for its clients and hasn’t ruled out subsequent increases.
“The costs appear to have changed every time I answer the phone,” claimed Gaurav Uppal, CEO of electric motorbike manufacturer One Electric.
To keep cell producers interested in this market, Indian manufacturers need to join a consortium and put substantial orders, according to Uppal. Otherwise, global cell manufacturers would direct supplies to markets with predictable quantities.
According to a top executive of a large non-Chinese cell maker, which is also recognised for its consumer electronics brand, the company’s India ambitions have been placed on hold. Instead, the firm is concentrating on huge orders from European and American manufacturers.
As more cell production capacity becomes active throughout the world, experts predict it will take at least 15-24 months for the situation to normalise.
India has also introduced a production-linked incentive (PLI) programme to encourage investment in advanced chemical cell manufacture in the country. It has set a financial target of Rs 18,100 crore for the next five years. However, additional capacity under this plan will take years to come online, analysts say, and the Indian EV sector would rely on imported cells in the meanwhile.
According to statistics submitted to Parliament by Prahlad Joshi, the minister of mines, coal, and parliamentary affairs, India imported lithium and lithium-ion batteries worth about Rs 9,000 crore in FY21.